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Manor Grand Prix Racing Limited enters administration

Geoff Rowley and Geoff Carton-Kelly, partners of FRP Advisory LLP, the specialist restructuring and recovery firm, have been appointed joint administrators to Manor Grand Prix Racing Limited, trading as the Marussia F1 Team.

“With the Marussia F1 Team now in administration, the joint administrators have assessed that, given the current financial circumstances of the Group, it is not viable for the Marussia F1 Team to participate in the next race, the 2014 Formula 1 United States Grand Prix, due to take place this weekend in Austin, Texas,” said Rowley.

The company will continue to operate while the joint administrators assess the longer term viability of the company in its present form. The key question now is whether or not Manor Grand Prix Racing Ltd (registered company number 6661964) was the signatory to the Concorde Agreement in 2009 when it first entered F1. This is important because while a signatory company can change its name, it cannot transfer it rights to other companies and so if this is the same company (which appears to be the case) then, in all probability, the team’s rights, obligations and benefits all terminate immediately if the company is declared to be insolvent. Administration is a rescue mechanism for insolvent entities and so it is fair to say that the company is insolvent. The details of the bilateral agreements between the teams and the commercial rights holder are secret, but we believe that there is a clause that terminates all rights if a team is insolvent. Thus the entry evaporates and is not available for sale. Thus the team cannot simply turn up at future races and take up where it left off.

The administrators say that no redundancies have been made and that all staff have been paid in full to the end of October. The ongoing staff position will however be dependent “on whether the company can secure new investment in the limited time available.” It is not clear what the Administrator means by this, but it might either mean that the entry is held by a different company (which does not appear to be the case) or that they have not yet had a chance to read the various agreements.

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This saddens me greatly as this is a team with pedigree as it came up from lower categories and had a base to build on.

I know small teams fold all the time, especially in times of change (new engines etc) but like so many say, how is F1 sustainable?
The rules are so stacked against the smaller teams, they have little hope of gaining a foothold than actually scoring points.

I used to think that an F1 teams should spend whatever it can get ita hands on and devil take the hindmost. But now it’s so blindingly obvious that all but a few teams are on the edge of the precipice of bankrupcy.

I do not believe there is a choice. If I was the Manor management and had US backers behind me, I would go and grab the Caterham franchise and go to work. There are plenty of staff and assets kicking around, only the entries are in short supply.

So who could be the next domino to fall? Lotus or Sauber? FOM and the FIA are reaping what they have sowed, by failing to put a budget cap in place. This is looking like a replay of 1952, where F2 in effect replaced F1 for two years, due to the paucity of entries.

Now that there will only be 18 cars at the US GP is there a minimum number of cars that must appear at a GP in the race promotors contracts?

It is sad to see 2 teams dissapear from the grid and I suspect there are more in difficulty. How long will it take for FOM, the FIA and the teams to sit down and work out a more sustainable future for F1?

Understand it is 14 cars before the contract is breached is that at first scrutinering for the weekend or at the start of the race? IE what if 4 cars collided in qualifying and could not be repaired with spares on hand? Force Major?

I cannot see how this will change the minds of the midfield teams, unless he commits to giving them millions and millions of extra income. Allowing third cars will mean that the midfield become the new back markers. Putting that into perspective, if one applied the idea to the situation right now, the best that Ferrari could hope for (if everyone was reliable and avoided crashes) would be 10th place, the best McLaren could not expect to finish better than 13th, Force India would have to be content with the best best possible result of 16th and Toro Rosso would have to satisfied with 19th. Even if all the cars were allowed to score points it would be a disaster for the midfield. Trying to negotiate new agreements would require concessions and teams would be throwing all kinds of things at Ecclestone to get their agreement. In short, it is not going to happen.

A sensible limit needed to be agreed. I believe that a 2,or 3 person team of accountants living with each outfit and regularly comparing data could soon work out who is cheating. And where the limited funds have come from.

Given that this is the 2nd failure in less than a month, why would anyone in their right fiscal mind – ie Gene Haas – ever want to spend/waste money on starting a new team in the current environment??? Are their egos that much in need of stroking?

To quote Max Mosley “the chickens have come home to roost”.
The three teams, HRT, Manor (Marussia) and Caterham that were lured in by the false promise of a cost cap have finally gone, or are going, to the wall. F1, the FIA and CVC only have themselves to blame – or perhaps that’s what they wanted all along.

Is it in any way possible Marussia have looked at Caterham, thought “Uh… Wipe out the debts… Come back in 2 races… Brilliant!”? It looked from the outside that with their plucky Monaco result, payments from Bernie, and now no 11th team, Marussia’s future was suddenly a lot more positive. Is it possible the people at the top of Marussia don’t know British or F1 law, and have just wiped out $90,000,000?

Sadly the balance sheet shows I think $240 million debt at Manor / Marussia (correct me if I’m wrong I can’t find the reference now), so $90 m isn’t going to help and I’m guessing that only applies to the original company that entered – I’m guessing you can’t get to the $90 m without taking on the debt.

There was once a theory that Bernie wanted shut of Caterham and Marussia and that 3 cars was better for him. I cannot remember why that was other than having to throw £10m a season at each of the stragglers that didn’t get proper Constructor money. Is that still relevant?

Kudos to Auto Motor Und Sport for breaking this story a few days ago (slightly before Bernie said anything), but even more Kudos to you Joe.

Yours is the only F1 site covering the real detail and allowing an open forum for freedom of discussion on a sport close to our hearts.

Another factory full of people who have to pay the price, and the team I was most behind of the newer teams, mainly because of Graeme Lowdon who hails from my locale and appeared a good role model with a sound financial and entrepreneurial background. Indeed, if Graeme is involved in the decision to bring in the administrators, then, considering what happened with Just2Clicks, I would have thought they would be in a decent-ish situation.

Just2Clicks wound up with money left in the bank to give a return to employees and shareholders rather than letting it run to insolvency. I know the directors of Just2Clicks won out in that deal (Directors had advance share options at massively reduced prices meaning they got a nice big return on their shares whereas public shareholders got only a percentage return (£3.5 million pounds for Mr Lowdon)), but still… I’d much rather a company that was going to the wall made this decision, obviously so long as the trading conditions were not known before the flotation (as that would be illegal!!).

In any case, my commiserations to the staff, some of whom are almost certainly going to end up out of jobs from the two teams now.

Joe, are Marussia signatories to the Concorde agreement? If they’re not, presumably their entry can’t be transferred, and would this potentially make the entry worthless for a buyer? I hope they keep going, as they were/are one of the friendliest teams on the grid, with a human face. I wish them luck.

What a ridiculous remark. You clearly have not a clue about the size and power of F1 as a business. This will be going long after all of us, as long as the people who are supposed to be the guardians of the sport do what they are supposed to do.

No, I disagree. Caterham is more attractive because it has an entry. Once someone has this the Marussia assets are not worth much. Probably the same buyer would buy much of the stuff, which is why I wondered whether the Marussia management might not take their new investor and buy the Caterham entry and then pick up the Marussia assets and staff.

That would be comical if it weren’t actually such a realistic possibility. So one team’s management ‘divest’ itself from er…itself, goes and buys its competitor’s entry, then picks up its own previously divested assets on the cheap and go racing again (under the guise of its competitor’s name quite possibly)…you couldn’t make this stuff up..

It is all there in the posts. Caterham’s entry is with 1MRT, which is not insolvent. I believe that Marussia’s is with Manor Grand Prix Racing Ltd, which is insolvent. As I understand it (and I am sure it is right), the rights and benefits of any team cease if the entry-holding company is insolvent. This Caterham has value and Marussia does not.

Joe, if I interpreted your comments correctly, you hinted a couple of weeks/months ago that having teams collapse and therefore have a grid of less than 20 cars is actually in the interests of the FIA, as it will mean FOM is in default of their agreement and the commercial rights will return to the FIA. Would this account for the FIA’s silence and generally dismissive attitude to the need for a cost-cap? While it is sad that the staff and fans of Caterham and Marussia pay the price in the meantime, possibly longer-term that scenario will be advantageous by resetting the commercial picture to a more equitable situation for the remaining teams, the FIA and possibly even the fans. Mr Todt is nobody’s fool, and historically has never been slow to silently go about challenging the perceived order of things in order to fulfill his employer’s long-term objectives. Any thoughts?

We do not know the details of these agreements. All we have to go on is hints. However, there is no doubt in my mind that the teams and FOM are committed to providing 20 cars on a week-to-week basis. If they cannot then there is the provision for the random third cars to make the field up to 20. The 100-year agreement could be 20, but it could be 16.

Indy – Joe’s stated that IF Marussia are declared insolvent (which is generally the case when you call in an administrator), then they would lose their F1 entry license. This would render Marussia’s assets worthless to any potential investor.

So is it reasonably certain that Marussia’s entry has been forfeited by the act of entering administration? (Not the case with Caterham, as I understand it, because it’s not the entrant itself that is in administration there.). If so, then the value of the assets just took a mighty hit — they have no place to race.

Which, following the train of thought through, means that Caterham has just inherited 10th in the WCC and the money that goes with it, and thus is a lot more viable. If I was Tony Fernandes I would be asserting my rights to the Caterham entry pretty briskly, and cosying up to the Marussia administrators to pick up as much of the assets and staff as possible. Better to lose only one team then two.

Does that also mean that Marrusia lose the 2nd column payment that would have now received as a result of finishing in the top 10 for two consecutive seasons? Does the insolvent team get the money, even though they can no longer enter? Or are they deleted entirely from the 2014 standings?

I realise that this is a less important point, but is just wondered where all that extra money will go? (Although I can probably guess)

Joe, how come Sauber isn’t in the same situation? They were almost in administration when the Russia deal was announced, then the Russian money apparently didn’t show up. So who did pay their bills, and continues to do so? Is it the Mexican backers of Gutierrez? I know Sutil brings some money as well, but it can’t be nearly enough to keep the team afloat.

My understanding of UK insolvency law is that a company can be placed into voluntary administration by the owners to protect the company from running into insolvency in the future. It is clear from the statement this is the case, and that the company itself is not yet insolvent, but will become insolvent if things don’t change.

Obviously I don’t have sight of the contract, and the wording will be key, but I would be surprised if the owners would place the company into administration voluntarily if it meant the entry was immediately lost. With the administrator retaining all the staff they obviously think there is a chance to save the team, as by law an administrator is required to take all necessary steps to protect creditors interests. By retaining staff they obviously feel it is in their interests to keep the team going.

In Germany, the process starts with a thing called provisional or preliminary administration. The company is protected from its creditors and a court appoints an administrator, who then tries to save, sell as a whole or wind down the company. Only in the last case, the company actually is considered to be in administration where its assets are sold. Maybe it is the same or comparable in the UK?

It is the same over here on the continent, whenever you cannot pay your bills or the company’s net worth is negative, i.e. the assets are worth less then the money owed to external creditors, than you have to go into administration, but that does not mean the company is automatically doomed, that is why it is called preliminary administration.

But Marussia did not immediately loose its entry, did it? I mean they were in administration, but they still were able to appy for the entry for next season and appeared on the entry list.

So it does apparently mean that you do not loosee your F1 “licence” by just entering administration. But as the licence is tied to the company, you are probably not able to sell it seperately and whenever the company is liquidated, the F1 licences ceases, too.

Would make sense, as it prevents team from shedding debts by closing down one company and setting up a new one, as it sometimes happens in other sports leagues.

or for entities which believe they are about to become insolvent. Without sight of the exact contract wording we are just guessing though.

For example in scottish football any club which becomes insolvent automatically means cancellation of their league membership. However insolvency is deemed to have taken place into a club is placed into liquidation.

I would be amazed if they would voluntarily place a company in administration if it would immediately reduce its value to zero, but then this is the wacky world of f1 we are talking about.

Thanks fot the terrific information here, Joe, but I’m a little confused here, in that hasn’t 1MRT now been taken under the Caterham administrator’s wing as well, by mutual consent? Surely that would render their entry invalid also… or does it not count because they weren’t declared insolvent before that happened?

It’s been suggested repeatedly over the last several months that the Total money is worth less than the money saved by using cheaper Mercedes engines instead of expensive Renault ones. (Which matters because even if Romain stays, there’s been a question mark over whether the Total money would stay with a Mercedes powered team).